The golden visa effect: how the sale of citizenship influences European real estate markets
The global economic crisis, which hit Europe 2008, affected real estate markets across the continent. Since then, certain countries have tried to stimulate their economies and increase investment flows using golden visa programmes, through which authorities grant citizenship and residency for buying real estate.
In this article, Tranio analysts look at how the real estate market in five European countries – Latvia, Portugal, Spain, Cyprus and Greece – has developed.
The Latvian economy recovered from the crisis relatively quickly with the support of the International Monetary Fund (IMF). In 2009,
Latvia launched its golden visa programme in April 2010. Its low investment threshold (€140,000 for Riga and €70,000 for other regions) guaranteed instant popularity. According
Residential property prices in Latvia collapsed immediately as a result of the crisis. According to Eurostat, from early 2008 to 2010, the price per square metre fell by half. However, the launch of the golden visa programme saw property prices growing rapidly until the increase in the investment threshold. Prices grew by 40% to Q3 2014, but quickly fell following the announcement. Prices stabilised over time, and by Q2 2017 the price per square metre in Latvia was 14% higher than during the period of growth in 2014.
According to the European Mortgage Federation, the programme had a similar effect on the number of real estate transactions, which had been increasing since 2010. In 2014, it stopped growing and in 2015, the number of transactions fell by 3%. There is no official data for 2016 and 2017 yet.
The golden visa programme has had a significant effect on the Latvian real estate market, having guaranteed over 4% of sales in 2014 – a record year for residence permits issued. However, the investment threshold increase caused the number of applicants to shrink rapidly (there were 10 times fewer applications in 2016 than 2014), weakening the significance of the programme.
In October 2012, the Portuguese government announced
Real estate prices fell from 2010
According to the European Central Bank, the number of real estate transactions involving residential property in Portugal grew by over 1.5 times between 2012 and 2015, from 76,000 to 127,000. In H1 2017, the number of properties sold was almost the same as the whole of 2012.
Generally, the growth
Having recovered from the crisis, the Spanish economy is slowly gaining ground. In 2009 its GDP fell 3.57%, a historic low, but since 2012, it has been growing steadily, reaching 3.2% in 2016.
Spain launched its
As of Q3 2017, residential property prices in Spain were 40% below its 2007 peak. According to Fotocasa, the average price per square metre fell from €2,862 to €1,716 in the past decade. According to Eurostat, prices bottomed out in early 2014, several months after the launch of the golden visa programme. However, prices started climbing again as early as in Q2 2014, and since then the average quarterly growth has exceeded
According to the Spanish Statistical Office, the number of real estate transactions started growing the same year, from 313,000 in 2013 to 405,000 in 2016. There were 316,000 transactions at the end of Q2 2017, already exceeding the 2013 total.
Despite the success of the Spanish programme, it should be noted that the number of golden visas it granted compared to the total number of real estate transactions is insignificant (about 0.1%). The main incentives for buying property in Spain are low mortgage rates, the climate (for those who buy property for their own use) and
In Barcelona, which accounts for almost a half (43%) of the residence permits issued,
The Cypriot economy is actively recovering.
Cyprus launched its
According to Eurostat, in Q2 2017, property prices in Cyprus were 21% lower compared
When the golden visa programme was launched, the number of property transactions grew for the first time since 2008. In 2007, a record 21,000 transactions were closed, but in 2013 the market hit the bottom, with only 3,767 properties sold that year. In 2016, more than 7,000 transactions were closed, and in the first four months of 2017 there were already 2,700 deals made.
An important feature of the Cypriot programme is its significance
Greece is among the few European economies that have not recovered from the 2008 financial crisis. However, its economy is getting back on track, and the International Monetary Fund expects
Greece launched its
According to official data, in Q2 2017, the average price per square metre in Greece was 43% lower compared to its peak in Q3 2008. The programme did not affect price dynamics significantly. The decline in property prices is now slowing down – according to the Bank of Greece, in 2016, prices fell by 1.8%, which is 3.5 percentage points lower than the year before. According to more optimistic estimates by the Global Property Guide, it grew by 0.15%. According to Trading Economics forecasts, property prices across the country will grow by an average of 22% between 2016 and 2020.
According to the European Mortgage Federation, the number of transactions involving residential property started shrinking in 2006. In 2014, 43,400 transactions were registered, which was almost four times less than in 2008. However, in 2015, this number grew by 25.8%. There is no data for 2016 and 2017 yet.
Today, golden visas account for only 1% of Greek property transactions. However, the gradual recovery of the economy, the growing number of tourists, and low property prices are attracting more international investors who want to obtain European residence in the near future.
Originally published on Citizenshipbyinvestment.ch